Burns Philp saviour to stay on

The deal would make Burns Philp the largest yeast producer in Europe and considerably enhance its scale. It stands to realise potentially massive synergies by combining its own operations with those of Gist-brocades not only in Europe but in South America and Asia.

The company is believed to have already held preliminary talks with Gist-brocades' Dutch parent, chemicals producer DSM. The discussions are further to Burns Philp's recent dealings with DSM, which include the purchase about a month ago of a Gist-brocades yeast plant in India.

Gist-brocades, which was once considered a potential buyer of Burns Philp, is not formally for sale. However, DSM, a petrochemical company, is making a thorough review of its assets and, given its willingness to sell pieces of Gist-brocades, is thought to consider the business non-core. The company is expected to finish its inventory later this year.

Contrary to common opinion, Burns Philp has time on its side. It was thought that the company had started paying interest on the $US400 million raised in June through a US debt issue at an interest rate of 9.75 per cent.

However, the first interest payment is not due until January next year, giving Burns Philp perhaps until the end of 2002-03 before it needs to make productive use of the funds.

Analysts have estimated the company could spend up to $US500 million either on a single acquisition or several smaller deals.

Mr Degnan, along with major shareholder Graeme Hart, steered Burns Philp through its darkest days in 1997 and 1998, and is expected to see the company through its new acquisitive phase.

He is near to finishing a five-year contract and is anxious to sign another for three or four more years. ``I'm going to sign another deal," Mr Degnan said after last week guiding the company to its strongest result since it almost collapsed under a mountain of debt.

``I'm very happy doing what I'm doing. I've enjoyed the full experience with Burns Philp from day one. I've had a career and a half in the last five years."

Mr Degnan, 54, wants to end his days as a hands-on executive at Burns Philp. ``I would expect to move out of here and retire. I'm not looking for an opportunity to do more somewhere else but I am looking forward to doing more here."

He said acquisitions were a priority.

Last week Burns Philp produced a 65.2 per cent rise in 2001-02 net profit of $146.2 million. Earnings before interest, tax, depreciation and amortisation increased a solid 12.4 per cent to $294.5 million.

One of the result's highlights was the North American herbs and spices business, which was responsible for almost dragging the entire company under in 1997. It increased EBITDA by about 51 per cent.

Rumours have long circulated that Burns Philp would attempt to sell herbs and spices once it has returned the division to full health. However, Mr Degnan indicated for the first time that Burns Philp may decide to hold the asset.

It is improving every year," Mr Degnan said.